Went through the BloodXp guide following all steps exactly.
I can run Blood with just the music enabled
but with soundFx, when i run the shortcut - it
just goes black for a few seconds and crashes
to desktop.

Thats bummer try actually not using VDM Sound as i seem to recall someone posting how the sound was fine in Blood with that sound chip.Also did you install the soundblaster live fix? if you did try uninstalling it.Change IRQ`s and DMA`s etc as well and see if anything helps,try setting the IRQ to 5.